World Economic Forum report traces the emergence of the Industrial Internet of Things and the outcome economy, qualifies opportunities and risks, and offers recommendations for industry stakeholders

The World Economic Forum’s IT Governors launched its Industrial Internet initiative at the organization’s Annual Meeting 2014 in Davos, Switzerland. Over the course of the following eight months, the project team developed a guiding framework and conducted a series of research activities, including in-person workshops, virtual working group sessions, interviews of key thought leaders, and a survey of innovators and early adopters around the world. The resulting Industry Agenda report, produced in collaboration with Accenture, is entitled “Industrial Internet of Things: Unleashing the Potential of Connected Products and Services.” The 40-page report can be downloaded in its entirety from the World Economic Forum website at http://www.weforum.org/reports/industrial-internet-things.

The report makes our Required Reading on the Industrial IoT list for its concise and comprehensive rendering of the how the Internet of Things revolution that has already reshaped business-to-consumer industries will dramatically alter manufacturing, energy, agriculture, transportation and other industrial sectors of the economy over the next 10 years. These industries account for nearly two-thirds of the global gross domestic product (GDP), the report notes.

This latest wave of technological change will bring unprecedented opportunities, along with new risks, to business and society, the report contends. It will combine the global reach of the Internet with a new ability to directly control the physical world, including the machines, factories and infrastructure that define the modern landscape. However, like the Internet was in the late 1990s, the Industrial Internet is currently in its early stages. Many important questions remain, including how it will impact existing industries, value chains, business models and workforces, and what actions business and government leaders need to take now to ensure long-term success.

The report’s authors argue that the Industrial Internet is indeed transformative. It will change the basis of competition, redraw industry boundaries and create a new wave of disruptive companies, just as the current Internet has given rise to Amazon, Google and Netflix. However, the vast majority of organizations are still struggling to understand the implications of the Industrial Internet on their businesses and industries. For these organizations, the risks of moving too slowly are real.

Further, disruption will come from new value creation made possible by massive volumes of data from connected products, and the increased ability to make automated decisions and take actions in real time. The key business opportunities will be found in four major areas:

Collaboration between humans and machines, which will result in unprecedented levels of productivity and more engaging work experiences

Rise of the outcome economy

As the Industrial Internet gains broader adoption, businesses will shift from products to outcome-based services, where businesses compete on their ability to deliver measurable results to customers. Such outcomes may range from guaranteed machine uptimes on factory floors, to actual amounts of energy savings in commercial buildings, to guaranteed crop yields from a specific parcel of farmland.

Delivering such outcomes will require new levels of collaboration across an ecosystem of business partners, bringing together players that combine their products and services to meet customer needs. Software platforms will emerge that will better facilitate data capture, aggregation and exchange across the ecosystem. They will help create, distribute and monetize new products and services at unprecedented speed and scale. The big winners will be platform owners and partners who can harness the network effect inherent in these new digital business models to create new kinds of value.

The report’s authors also propose that the Industrial Internet will drive growth in productivity by presenting new opportunities for people to upgrade skills and take on new types of jobs that will be created. An overwhelming majority of executives we surveyed believe that the growing use of “digital labor” in the form of smart sensors, intelligent assistants and robots will transform the skills mix and focus of tomorrow’s workforce.